BofA Joins Chase and Ally in Delaying Foreclosures

October 1 2010 (Jeff Alan)

Bank of America joined JPMorgan Chase and Ally Bank in delaying foreclosures in 23 states pending a review as to whether it rushed the foreclosure process for thousands of homeowners without reading the documents.

The move adds the nation’s largest bank to the list of mortgage companies whose employees signed documents in foreclosure cases without reportedly verifying the information in them.

Bank of America isn’t able to estimate how many homeowners’ cases will be affected, Dan Frahm, a spokesman for the Charlotte, N.C.-based bank, said Friday. He said the bank plans to resubmit corrected documents within several weeks.

The document problems could cause thousands of homeowners to contest foreclosures that are in the works or have been completed. If the problems turn up at other lenders, a foreclosure crisis that’s already likely to drag on for several more years could persist even longer. Analysts caution that most homeowners facing foreclosure are still likely to lose their homes, however, possibility of lawsuits by homeowners could delay the process.

State attorneys general, who enforce foreclosure laws, are stepping up pressure on the industry, many asking banks to institute a 60 day moratorium on foreclosures until they can show that banks have complied with state consumer protection laws.

Mark Paustenbach, a Treasury Department spokesman, said the Treasury has asked federal regulators “to look into these troubling developments.” And the Office of the Comptroller of the Currency, which regulates national banks, has asked seven big banks to examine their foreclosure processes.

Consumer advocates say the problems are widespread across the lending industry.

“The general level of sloppiness is pervasive around the industry,” said Diane Thompson, counsel at the National Consumer Law Center.

Banks contend that they have strong policies in place to insure that paperwork is reviewed properly and that proper procedures are followed.